Tesla's approach a hit with public, but not state

Sy Margolin of Fort Lee looking at a $91,000 Tesla model at the electric carmaker's Garden State Plaza showrooms.

Two salesmen quietly attended to an elderly couple and a middle-aged man with three youngsters Wednesday afternoon as they moved around the gleaming red roadster, and a similar white one, while a screen showed a speeding car interspersed with rave reviews about the cars.

"I think it's great," said Rosalie Margolin, 78, of Fort Lee, to her husband Sy, after she stepped out of the red car. "I think it's a car for our son."

Yet the showroom sells electric cars made by the Tesla Motor Co., and the showroom is on the second floor of the Garden State Plaza mall, flanked by a women's couture clothing store and a designer jeans outlet. And by April 1 Tesla's Paramus showroom, and another in Short Hills, apparently must close.

That's the date that that Tesla's operating license expires and a new state rule, approved Tuesday by the New Jersey Motor Vehicle Commission, kicks in - making Tesla's direct manufacturer-to- consumer business model illegal.

The rule amending the state's Franchise Practices Act, was the latest shot in an ongoing skirmish being played out across the nation between Tesla and established car dealerships, who want to protect the existing structure, in which manufacturers sell cars through the "middle man" of franchised dealerships. State officials said the amendment was needed to close a loophole through which Tesla was able to get licenses for its two New Jersey locations.

Tesla says its vehicle, and the technology inside, is so new that it needs to talk directly with consumers, and the traditional high-volume sales model of a franchise does not work. Traditional dealers, however, say the franchise model allows for price competition, and that franchises have more incentive than manufacturers to respond to customer safety concerns and recalls.

What Tesla will do in response to the new regulation is unclear.

Patrick Jones, a Tesla spokesman at the company's Palo Alto, Calif., headquarters, declined to comment on whether the company can appeal the regulations, or might file suit to make its argument in court.

The commission's new requirements include a demand that new car sellers have at least 1,000 square feet of display area, space for two vehicles and enough space to maintain equipment for the servicing of vehicles. Most difficult of all for Tesla to comply with is a requirement that the car vendor be the franchise of a manufacturer.

Texas and Arizona prohibit Tesla's sales model, New York allowed the company to open four stores, but a bill pending in the New York legislature - being pushed by car dealerships - would severely limit the circumstances under which a manufacturer can sell vehicles without a franchisor.

In Texas, faced with a state prohibition on direct manufacturer-to-consumer sales, Tesla opened two "galleries," where consumers can see the cars and learn about them from company representatives, but they can't buy or test drive the vehicles.

Texas consumers who want to buy a Tesla have to go to the company's website, where they can create a custom design for their roadster, which is then delivered from the factory in Freemont, Calif., by a "third party," said Jones.

"We are still able to provide an educational experience and talk about the vehicles," Jones said. But added: "Not being able to discuss pricing and not being able to test the product are huge impediments to the purchasing process."

He said the company also pushed legislation in Texas to change the state law so that manufacturers could sell cars directly to consumers, but the effort failed in the face of opposition from dealers.

Tesla's approach a hit with public, but not state

Sy Margolin of Fort Lee looking at a $91,000 Tesla model at the electric carmaker's Garden State Plaza showrooms.

By HUGH R. MORLEY

Staff Writer |

The Record

It seemed like a typical scene in a Paramus car showroom.

Two salesmen quietly attended to an elderly couple and a middle-aged man with three youngsters Wednesday afternoon as they moved around the gleaming red roadster, and a similar white one, while a screen showed a speeding car interspersed with rave reviews about the cars.

"I think it's great," said Rosalie Margolin, 78, of Fort Lee, to her husband Sy, after she stepped out of the red car. "I think it's a car for our son."

Yet the showroom sells electric cars made by the Tesla Motor Co., and the showroom is on the second floor of the Garden State Plaza mall, flanked by a women's couture clothing store and a designer jeans outlet. And by April 1 Tesla's Paramus showroom, and another in Short Hills, apparently must close.

That's the date that that Tesla's operating license expires and a new state rule, approved Tuesday by the New Jersey Motor Vehicle Commission, kicks in - making Tesla's direct manufacturer-to- consumer business model illegal.

The rule amending the state's Franchise Practices Act, was the latest shot in an ongoing skirmish being played out across the nation between Tesla and established car dealerships, who want to protect the existing structure, in which manufacturers sell cars through the "middle man" of franchised dealerships. State officials said the amendment was needed to close a loophole through which Tesla was able to get licenses for its two New Jersey locations.

Tesla says its vehicle, and the technology inside, is so new that it needs to talk directly with consumers, and the traditional high-volume sales model of a franchise does not work. Traditional dealers, however, say the franchise model allows for price competition, and that franchises have more incentive than manufacturers to respond to customer safety concerns and recalls.

What Tesla will do in response to the new regulation is unclear.

Patrick Jones, a Tesla spokesman at the company's Palo Alto, Calif., headquarters, declined to comment on whether the company can appeal the regulations, or might file suit to make its argument in court.

The commission's new requirements include a demand that new car sellers have at least 1,000 square feet of display area, space for two vehicles and enough space to maintain equipment for the servicing of vehicles. Most difficult of all for Tesla to comply with is a requirement that the car vendor be the franchise of a manufacturer.

Texas and Arizona prohibit Tesla's sales model, New York allowed the company to open four stores, but a bill pending in the New York legislature - being pushed by car dealerships - would severely limit the circumstances under which a manufacturer can sell vehicles without a franchisor.

In Texas, faced with a state prohibition on direct manufacturer-to-consumer sales, Tesla opened two "galleries," where consumers can see the cars and learn about them from company representatives, but they can't buy or test drive the vehicles.

Texas consumers who want to buy a Tesla have to go to the company's website, where they can create a custom design for their roadster, which is then delivered from the factory in Freemont, Calif., by a "third party," said Jones.

"We are still able to provide an educational experience and talk about the vehicles," Jones said. But added: "Not being able to discuss pricing and not being able to test the product are huge impediments to the purchasing process."

He said the company also pushed legislation in Texas to change the state law so that manufacturers could sell cars directly to consumers, but the effort failed in the face of opposition from dealers.